EXHIBIT 10.3
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INVESTOR REGISTRATION RIGHTS AGREEMENT
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THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
June
25, 2004, by and among CORPORATE
STRATEGIES, INC., a Delaware corporation, with
its principal office located at 1770 St.
James Place, Suite 116, Houston, Texas
77056 (the "Company"), and the undersigned
investors (each, an "Investor" and
collectively, the "Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among
the parties hereto of even date herewith
(the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and
subject to the conditions of the
Securities Purchase Agreement, to issue and
sell to the Investors secured
convertible debentures (the "Convertible
Debentures") which shall be convertible
into that number of shares of the Company's
Class A Common Stock, par value
$0.001 per share (the "Common Stock") and
2,500,000 shares of Common Stock (the
"Investor's Shares"), pursuant to the terms
of the Securities Purchase Agreement
for an aggregate purchase price of up to
Seven Hundred Fifty Thousand Dollars
($750,000). Capitalized terms not defined
herein shall have the meaning ascribed
to them in the Securities Purchase
Agreement.
B. To induce the Investors to execute and deliver the
Securities
Purchase Agreement the Company has agreed
to provide certain registration rights
under the Securities Act of 1933, as
amended, and the rules and regulations
there under, or any similar successor
statute (collectively, the "1933 Act"),
and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good
and valuable consideration, the
receipt and sufficiency of which are hereby
acknowledged, the Company and the
Investors hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following
meanings:
(a) "Person" means a corporation, a limited liability company,
an
association, a partnership, an
organization, a business, an individual, a
governmental or political subdivision
thereof or a governmental agency.
(b) "Register," "registered," and "registration" refer to a
registration effected by preparing and
filing one or more Registration
Statements (as defined below) in compliance
with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any
successor rule providing for offering
securities on a continuous or delayed basis
("Rule 415"), and the declaration or
ordering of effectiveness of such
Registration Statement(s) by the United States
Securities and Exchange SEC (the
"SEC").
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(c) "Registrable Securities" means the shares of Common Stock
issuable to Investors upon conversion of
(i) the Convertible Debentures pursuant
to the Securities Purchase Agreement and
(ii) the Investor's Shares.
(d) "Registration Statement" means a registration statement
under
the 1933 Act which covers the Registrable
Securities.
2. REGISTRATION.
(a) Subject to the terms and conditions of this Agreement, the
Company shall prepare and file, no later
than thirty (30) days from the date
hereof (the "Scheduled Filing Deadline"),
with the SEC a registration statement
on Form S-1 or SB-2 (or, if the Company is
then eligible, on Form S-3) under the
1933 Act (the "Initial Registration
Statement") for the registration for the
resale by all Investors who purchased
Convertible Debentures pursuant to the
Securities Purchase Agreement 12,500,000
shares of the Company's Common Stock
issued upon conversion of the Convertible
Debentures issued pursuant to the
Securities Purchase Agreement. The Company
shall cause the Registration
Statement to remain effective until all of
the Registrable Securities have been
sold.
(b) Effectiveness of the Initial Registration Statement. The
Company shall use its best efforts (i) to
have the Initial Registration
Statement declared effective by the SEC no
later than one hundred fifty (150)
days after the filing thereof (the
"Scheduled Effective Deadline") and (ii) to
insure that the Initial Registration
Statement and any subsequent Registration
Statement remains in effect until all of
the Registrable Securities have been
sold, subject to the terms and conditions
of this Agreement. It shall be an
event of default hereunder if the Initial
Registration Statement is not declared
effective by the SEC within two hundred
seventy (270) days after filing thereof.
(c) Failure to File or Obtain Effectiveness of the Registration
Statement. In the event the Registration
Statement is not filed by the Scheduled
Filing Deadline or is not declared
effective by the SEC on or before the
Scheduled Effective Deadline, or if after
the Registration Statement has been
declared effective by the SEC, sales cannot
be made pursuant to the Registration
Statement (whether because of a failure to
keep the Registration Statement
effective, failure to disclose such
information as is necessary for sales to be
made pursuant to the Registration
Statement, failure to register sufficient
shares of Common Stock or otherwise then as
partial relief for the damages to
any holder of Registrable Securities by
reason of any such delay in or reduction
of its ability to sell the underlying
shares of Common Stock (which remedy shall
not be exclusive of any other remedies at
law or in equity), the Company will
pay as liquidated damages (the "Liquidated
Damages") to the holder, at the
holder's option, either a cash amount or
shares of the Company's Common Stock
equal to two percent (2%) of the liquidated
value of the Convertible Debentures
outstanding as Liquidated Damages for each
thirty (30) day period after the
Scheduled Filing Deadline or the Scheduled
Effective Deadline as the case may
be. Any Liquidated Damages payable
hereunder shall not limit, prohibit or
preclude the Investor from seeking any
other remedy available to it under
contract, at law or in equity.
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(d) Liquidated Damages. The Company and the Investor hereto
acknowledge and agree that the sums payable
under subsection 2(c) above shall
constitute liquidated damages and not
penalties and are in addition to all other
rights of the Investor, including the right
to call a default. The parties
further acknowledge that (i) the amount of
loss or damages likely to be incurred
is incapable or is difficult to precisely
estimate, (ii) the amounts specified
in such subsections bear a reasonable
relationship to, and are not plainly or
grossly disproportionate to the probable
loss likely to be incurred in
connection with any failure by the Company
to obtain or maintain the
effectiveness of a Registration Statement,
(iii) one of the reasons for the
Company and the Investor reaching an
agreement as to such amounts was the
uncertainty and cost of litigation
regarding the question of actual damages, and
(iv) the Company and the Investor are
sophisticated business parties and have
been represented by sophisticated and able
legal counsel and negotiated this
Agreement at arm's length.
3. RELATED OBLIGATIONS.
(a) The Company shall keep the Registration Statement effective
pursuant to Rule 415 at all times until the
date on which the Investor shall
have sold all the Registrable Securities
covered by such Registration Statement
(the "Registration Period"), which
Registration Statement (including any
amendments or supplements thereto and
prospectuses contained therein) shall not
contain any untrue statement of a material
fact or omit to state a material fact
required to be stated therein, or necessary
to make the statements therein, in
light of the circumstances in which they
were made, not misleading.
(b) The Company shall prepare and file with the SEC such
amendments (including post-effective
amendments) and supplements to a
Registration Statement and the prospectus
used in connection with such
Registration Statement, which prospectus is
to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be
necessary to keep such Registration
Statement effective at all times during the
Registration Period, and, during
such period, comply with the provisions of
the 1933 Act with respect to the
disposition of all Registrable Securities
of the Company covered by such
Registration Statement until such time as
all of such Registrable Securities
shall have been disposed of in accordance
with the intended methods of
disposition by the seller or sellers
thereof as set forth in such Registration
Statement. In the case of amendments and
supplements to a Registration Statement
which are required to be filed pursuant to
this Agreement (including pursuant to
this Section 3(b)) by reason of the
Company's filing a report on Form 10-KSB,
Form 10-QSB or Form 8-K or any analogous
report under the Securities Exchange
Act of 1934, as amended (the "1934 Act"),
the Company shall incorporate such
report by reference into the Registration
Statement, if applicable, or shall
file such amendments or supplements with
the SEC on the same day on which the
1934 Act report is filed which created the
requirement for the Company to amend
or supplement the Registration
Statement.
(c) The Company shall furnish to each Investor whose
Registrable
Securities are included in any Registration
Statement, without charge, (i) at
least one (1) copy of such Registration
Statement as declared effective by the
SEC and any amendment(s) thereto, including
financial statements and schedules,
all documents incorporated therein by
reference, all exhibits and each
preliminary prospectus, (ii) ten (10)
copies of the final prospectus included in
such Registration Statement and all
amendments and supplements thereto (or such
other number
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of copies as such Investor may reasonably
request) and (iii) such other
documents as such Investor may reasonably
request from time to time in order to
facilitate the disposition of the
Registrable Securities owned by such Investor.
(d) The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered
by a Registration Statement under
such other securities or "blue sky" laws of
such jurisdictions in the United
States as any Investor reasonably requests,
(ii) prepare and file in those
jurisdictions, such amendments (including
post-effective amendments) and
supplements to such registrations and
qualifications as may be necessary to
maintain the effectiveness thereof during
the Registration Period, (iii) take
such other actions as may be necessary to
maintain such registrations and
qualifications in effect at all times
during the Registration Period, and (iv)
take all other actions reasonably necessary
or advisable to qualify the
Registrable Securities for sale in such
jurisdictions; provided, however, that
the Company shall not be required in
connection therewith or as a condition
thereto to (w) make any change to its
certificate of incorporation or by-laws,
(x) qualify to do business in any
jurisdiction where it would not otherwise be
required to qualify but for this Section
3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z)
file a general consent to service of
process in any such jurisdiction. The
Company shall promptly notify each
Investor who holds Registrable Securities
of the receipt by the Company of any
notification with respect to the suspension
of the registration or qualification
of any of the Registrable Securities for
sale under the securities or "blue sky"
laws of any jurisdiction in the United
States or its receipt of actual notice of
the initiation or threat of any proceeding
for such purpose.
(e) As promptly as practicable after becoming aware of such
event
or development, the Company shall notify
each Investor in writing of the
happening of any event as a result of which
the prospectus included in a
Registration Statement, as then in effect,
includes an untrue statement of a
material fact or omission to state a
material fact required to be stated therein
or necessary to make the statements
therein, in light of the circumstances under
which they were made, not misleading
(provided that in no event shall such
notice contain any material, nonpublic
information), and promptly prepare a
supplement or amendment to such
Registration Statement to correct such untrue
statement or omission, and deliver ten (10)
copies of such supplement or
amendment to each Investor. The Company
shall also promptly notify each Investor
in writing (i) when a prospectus or any
prospectus supplement or post-effective
amendment has been filed, and when a
Registration Statement or any
post-effective amendment has become
effective (notification of such
effectiveness shall be delivered to each
Investor by facsimile on the same day
of such effectiveness), (ii) of any request
by the SEC for amendments or
supplements to a Registration Statement or
related prospectus or related
information, and (iii) of the Company's
reasonable determination that a
post-effective amendment to a Registration
Statement would be appropriate.
(f) The Company shall use its best efforts to prevent the
issuance
of any stop order or other suspension of
effectiveness of a Registration
Statement, or the suspension of the
qualification of any of the Registrable
Securities for sale in any jurisdiction
within the United States of America and,
if such an order or suspension is issued,
to obtain the withdrawal of such order
or suspension at the earliest possible
moment and to notify each Investor who
holds Registrable Securities being sold of
the issuance of such order and the
resolution thereof or its receipt of actual
notice of the initiation or threat
of any proceeding for such purpose.
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(g) At the reasonable request of any Investor, the Company
shall
furnish to such Investor, on the date of
the effectiveness of the Registration
Statement and thereafter from time to time
on such dates as an Investor may
reasonably request (i) a letter, dated such
date, from the Company's independent
certified public accountants in form and
substance as is customarily given by
independent certified public accountants to
underwriters in an underwritten
public offering, and (ii) an opinion, dated
as of such date, of counsel
representing the Company for purposes of
such Registration Statement, in form,
scope and substance as is customarily given
in an underwritten public offering,
addressed to the Investors.
(h) Upon five (5) days prior written notice by the Investor,
which
notice shall not be given more than one (1)
time per calendar quarter, the
Company shall make available for inspection
by (i) any Investor and (ii) one (1)
firm of accountants or other agents
retained by the Investors (collectively, the
"Inspectors") all pertinent financial and
other records, and pertinent corporate
documents and properties of the Company
(collectively, the "Records"), as shall
be reasonably deemed necessary by each
Inspector, and cause the Company's
officers, directors and employees to supply
all information which any Inspector
may reasonably request; provided, however,
that each Inspector shall agree, and
each Investor hereby agrees, to hold in
strict confidence and shall not make any
disclosure (except to an Investor) or use
any Record or other information which
the Company determines in good faith to be
confidential, and of which
determination the Inspectors are so
notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a
misstatement or omission in any
Registration Statement or is otherwise
required under the 1933 Act, (b) the
release of such Records is ordered pursuant
to a final, non-appealable subpoena
or order from a court or government body of
competent jurisdiction, or (c) the
information in such Records has been made
generally available to the public
other than by disclosure in violation of
this or any other agreement of which
the Inspector and the Investor has
knowledge. Each Investor agrees that it
shall, upon learning that disclosure of
such Records is sought in or by a court
or governmental body of competent
jurisdiction or through other means, give
prompt notice to the Company and allow the
Company, at its expense, to undertake
appropriate action to prevent disclosure
of, or to obtain a protective order
for, the Records deemed confidential.
(i) The Company shall hold in confidence and not make any
disclosure of information concerning an
Investor provided to the Company unless
(i) disclosure of such information is
necessary to comply with federal or state
securities laws, (ii) the disclosure of
such information is necessary to avoid
or correct a misstatement or omission in
any Registration Statement, (iii) the
release of such information is ordered
pursuant to a subpoena or other final,
non-appealable order from a court or
governmental body of competent
jurisdiction, or (iv) such information has
been made generally available to the
public other than by disclosure in
violation of this Agreement or any other
agreement. The Company agrees that it
shall, upon learning that disclosure of
such information concerning an Investor is
sought in or by a court or
governmental body of competent jurisdiction
or through other means, give prompt
written notice to such Investor and allow
such Investor, at the Investor's
expense, to undertake appropriate action to
prevent disclosure of, or to obtain
a protective order for, such
information.
(j) The Company shall use its best efforts either to cause all
the
Registrable Securities covered by a
Registration Statement (i) to be listed on
each securities exchange on which
securities of the same class or series issued
by the Company are then listed, if any, if
the
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listing of such Registrable Securities is
then permitted under the rules of such
exchange or (ii) the inclusion for
quotation on the National Association of
Securities Dealers, Inc. OTC Bulletin Board
for such Registrable Securities. The
Company shall pay all fees and expenses in
connection with satisfying its
obligation under this Section 3(j).
(k) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and,
to the extent applicable, to
facilitate the timely preparation and
delivery of certificates (not bearing any
restrictive legend) representing the
Registrable Securities to be offered
pursuant to a R
